You are telling us what is happening now. I get what,is happening. I (we) are using our imaginations to imagine a world a little different. Tell me the same countries which now debase couldn't desperately try to strengthen. Oh yes, while we are talking about history, has it happened that,a country had to replace or revalue a currency because they couldn't pay their obligations? Even recently?
OK, a better idea for you would be to buy Gold denominated in a weaker currency like the Yen. Don't own Gold in dollars. I have nothing against Gold. If interest rates were at 15% and on their way down I would buy Gold. This is where Gold was in the 1980's at 150 or 200 an ounce. I would not buy Gold in a rising rate environment. I would much rather own Steel or Copper which are down like 80 to 90% off their highs. And if your time horizon is 10 years,I'm not sure how you are going to express a short rate trade that exists primarily on the front end of some yield curves. I gave you a great trade idea in the interest rate swap. You should feel it out more. When you buy a spot currency, you get paid a floating short term rate (the thing you think is going higher). And you sell a future on that currency which locks in a forward rate in the future. You have no currency risk. You are long a floating rate and short a fixed rate. Otherwise known in the financial world as a fixed for floating swap. If rates go higher, you get the higher interest paid to your account while your fixed rate you borrowed stays the same. Think it through some more.
Ah, bond traders. It's equities, man, equities. If everyone is shooting heroin you find out who makes the needles.
Negative rate is unusual, but not absurd. It's a fee charged by institutions, regarded as safe haven, for safeguarding the outflow of money from the EU periphery countries. It's like providing protection for a fee. Such fee can become larger (rate going even lower), if the need for protection is getting bigger. For the rate to rise in EU, the periphery needs to become safe or the core become overheated. Neither seems to be the case currently.
Yes, I would be much better off now, if I had gone long gold/short yen rather than just buying gold. Gold has actually held up fairly well compared to other commodities. Maybe gold is acting better because it is starting to be viewed more as a currency (or there is lack of faith in the central banks). I will investigate your interest rate swap idea. I don't have enough understanding at this point to estimate the cost of rolling over the trade over time but I suspect I will not like that aspect of it. Maybe the ultimate way to play this is to just wait for the day when interest rates spike and then follow the trend at that point. The problem is, that means I have to get the timing right which is easy to screw up.
What about the rise in gold between 1977 and 1980 during a rising rate environment. Is that an anomaly? The best charts I could find were here although the associated commentary seems hyperbolic: http://www.zealllc.com/2015/goldfrhk.htm
Yes, almost all the standard economic models broke down in the 1970's primarily due to the magnitude of the oil shock. The 1970's is a horrible decade to gleam any meaningful casual relationship between factors.
Do the standard economic models apply when every country is trying to debase their currencies and many developed countries have high levels of debt? Doesn't the current influence of central bankers on the financial market make this period different than all periods before?